Is there any stopping Costa? Coffee chain serves up 12 years of continuous sales growth

Is there any stopping Costa Coffee? Like a toddler after downing four shots of ristretto, the High Street chain is irrepressible.

Chosen by FTSE 100 firm Whitbread as one of its two core brands, alongside Premier Inn hotels, the coffee shop has rewarded the trust placed in it with 12 years of uninterrupted sales growth.

Full-year figures released yesterday showed Whitbread making strong progress even by its own caffeine-fuelled standards.

Success: Costa pulled in about £1.2billion of that, boosted by the opening of no fewer than 334 new stores and the installation of 955 Costa Express vending machines.

Pre-tax profit was 16.5 per cent higher at £411.8million, on sales that were up by 13 per cent to nearly £3billion.

Costa pulled in about £1.2billion of that, boosted by the opening of no fewer than 334 new stores and the installation of 955 Costa Express vending machines.Even stripping out the effect of expansion, sales were up 5.7 per cent, while underlying profit was nearly 22 per cent higher at £109.8million.

At Premier Inn, the story is much the same: revenue up 13.4 per cent to £967.9million, 5 per cent higher on a like-for-like basis, while underlying profit is 11.2 per cent higher at £348.1million.

It meant a sweetener is in order for investors, who will enjoy a 19.9 per cent increase in the full-year dividend to 68.8p per share. The stock climbed 20p to 4081p.

The progress made by this 270-year-old company in recent years has been nothing short of astounding.

When chairman Anthony Habgood, who retires this summer, first joined in 2005, Premier Inn had 28,000 rooms. It now has 55,000 in Britain alone and is building more in the Middle East, India and Indonesia.

Costa Coffee had just 420 stores, none of them overseas. By the end of next year it will have nearly that many in China alone, part of a network of 2881 stores dedicated to caffeinating the globe.

Such vast change is perhaps unsurprising, given how often the firm’s identity has shifted since Samuel Whitbread set up a small London brewery in 1742.

In the past decade Whitbread has sold David Lloyd Leisure, TGI Fridays and Pizza Hut, to focus on its two core brands, Premier Inn and Costa.

As boss Andy Harrison puts it: ‘Rather like Dr Who, we’ve gone through a number of incarnations.’

Recent growth has been set against the backdrop of a global recession that interrupted Premier’s growth only briefly, and barely left a mark in the froth of Costa’s cappuccino.

Whitbread: Premier Inn's revenue is up 13.4 per cent to £967.9million

Whitbread’s share price suffered along with others as consumers were hit in the downturn.

But had you taken the opportunity to buy stock in the dark days of March 2009, you would have doubled your money by today.

In the past year, the shares are up 58 per cent, ahead of a FTSE that has managed just 4 per cent.

As Harrison puts it, Whitbread has set itself apart from the ‘also-ran competition’. He claims this is because he has made his 43,000 staff happy so that they treat their monthly influx of 22million customers better.

On the face of it, Whitbread’s biggest threat is reaching coffee shop saturation.

SELLING CAFE SOCIETY TO THE FRENCH

Whitbread has even succeeded in flogging its coffee to the notoriously hard-to-please Parisian clientele. It has opened four shops in the French capital, which have elicited enough enthusiasm to warrant five more this year.

At some stage, the world will presumably reach the point where if there are any more branches of Costa the human race would surely drown in its own latte.

Not so, says Harrison. There are 330 more Costas planned for this year, with China set to remain the frontier of growth.

Unlike the UK, the People’s Republic is only in the early days of the coffee shop phenomenon and Costa Coffee managed to open 73 there last year.

Any company growing at breakneck pace runs the risk of pursuing size at the expense of cash flow.

That doesn’t seem to be the case at Whitbread, where cash flow jumped 14 per cent to £601million last year, despite expansion.

Analysts have also questioned whether it is wise expanding so quickly via joint ventures in China, when European markets may offer quicker and more predictable profits.

For now, there are very few clouds in Whitbread’s coffee.

But Harrison’s tenure will be judged on whether he delivers on the targets he has laid down for 2018.

Premier Inn has a goal of expanding from 55,000 rooms to 75,000, with London likely to be its main area of focus. Costa is aiming to hit £2billion of sales by 2018, compared with £1.2billion at present.

The firm claims that it is ‘on track’ to pass these milestones by sticking to its existing modus operandi.Whether it makes good on the strategy between now and 2018 will be key.